Welcome to the final installment of my accounting vocabulary series, where I provide you with definitions to some key accounting vocabulary terms. You can view O-S here, K-N here, G-H here, D-F here, and you can read A-C here!

It’s important to learn all of the vocabulary associated with accounting so that you can better understand the field as whole. Whether you’re an accountant, a student or even just a consumer, it’s important that you get a firm grasp of these vocabulary terms. Accounting may seem tricky at first, but once you learn a few of the most common terms, it will be a lot easier to understand. Here are a few accounting vocabulary words that start with the letters T through Z.

 

Trial balance – When an accounting period comes to a close, the transactions posted in the ledger are all added up. A trial balance sheet is created with liabilities and capital on one side and assets on the other. It is crucial that the two sides balance. If they don’t balance, the accountants will need to look through the transactions to figure out the reason for the imbalance. They continue to make trial balance sheets until the sides balance.

 

UBIT – UBIT stands for unrelated business income tax. An unrelated business income tax is a tax that a nonprofit is asked to pay that is not related to the nonprofit’s exempt purpose.

 

Usage variance – The usage variance, also known as the direct materials usage variance, arises in a standard costing system which shows the difference between the actual quantity of direct materials used at their standard cost, and the standard cost that should have been used for the good output. The standard cost of direct materials that should have been used is calculated by multiplying the standard quantity by the standard cost.

 

Variable cost – A cost that varies as changes occur in sales or production.

 

Working capital – A value that is calculated by subtracting the current liabilities from the current assets. The main components of working capital are typically accounts receivable, cash and inventory minus accounts payable. A business will have more inventory and larger accounts receivable as it grows. As a result, there will be a greater need for working capital.

 

Write-down – The partial decrease in an asset’s value.

 

Write-off – The entire reduction in the value of an asset. The asset no longer has any value. Both Write-downs and write-offs are non-cash expenses that have an effect on profits.

 

Yield to maturity – The total annual return on a bond investment if it is held to maturity. If a bond is purchased at less than its maturity value, the yield to maturity is the sum of the annual increases and the gain that occurs as the bond grows to the maturity value.

 

Zero-based budgeting – A budget that assumes no activities as opposed to the approach in which the previous year’s budget is considered the starting point for the next budget.

 

Thank you for sticking around for my accounting vocabulary series. I hope that you have gained a broader understanding of the field of accounting. Good luck in all of your accounting endeavors!